Verizon delivered better-than-expected first quarter results and gave its tally of iPhone activations. The company activated 2.2 million iPhones in the first quarter and 500,000 4G devices, including 260,000 HTC Thunderbolts.
The company reported earnings of $3.26 billion, or 51 cents a share, on revenue of $26.99 billion. Wall Street was looking for earnings of 50 cents a share on revenue of $26.86 billion.
In a statement, Verizon noted that it added 906,000 postpaid subscribers and had a retail churn of 1.01 percent. Note that Verizon counts smartphones and tablets in its postpaid subscriber tally. In the first quarter, Verizon added 364,000 connected devices like Apple's iPad and Samsung's Galaxy Tab. Total net additions to Verizon's network came in at 1.8 million. Verizon ended the quarter with 104 million total connections with 88.4 million retail customers.
Those results postpaid subscriber additions are generally lower than expectations. Barclays Capital was projecting postpaid additions of 1.2 million. The consensus view was 952,000 net postpaid additions. For comparison, AT&T activated 3.6 million iPhones in the quarter, a sum that indicates the power of the inexpensive 3GS. See: AT&T takes Verizon's best punch well; adds postpaid subs, activates 3.6 million iPhones
As far as the impact of the iPhone goes, this slide tells the tale:
Verizon reiterated that it was on track to meet its revenue and earnings target for the year. CEO Ivan Seidenberg also touted the acquisition of Terremark to bolster its cloud capabilities. Verizon is targeting revenue growth of 4 percent to 8 percent for 2011 with earnings growth of 5 percent to 8 percent.
On a conference call with analysts, Verizon CFO Fran Shammo said:
In a period of less than eight weeks, we activated 2.2 million iPhones, and in two weeks, we activated more than 260,000 of our first 4G LTE smartphone, the HTC ThunderBolt, at the premium price of $249.99. In addition, we added about 250,000 4G Internet devices to our retail postpaid base in the quarter and quickly sold out iPad 2 tablets in early March, so we built good momentum throughout the quarter.
We introduced our first 4G Mobile HotSpot device, and this past Monday, we announced the availability of our second one. We think these 4G Mobile HotSpots will be very popular with customers, as they essentially allow any WiFi-enabled device to function as a 4G LTE networked device. We expect demand for our 4G LTE products to strengthen as more smartphones, tablets and hotspots are added to our device portfolio. This includes the recent launch of the Novatel and Samsung mobile hotspots, as well as the addition of new 4G LTE smartphones in April, May and beyond.
By the numbers:
- Cash flow from operations in the first quarter was $5 billion, down from $7.1 billion a year ago. Why? The launch of the iPhone and pension obligations.
- Wireless revenue was $16.9 billion, up 10.2 percent from a year ago.
- 32 percent of Verizon's wireless customer base had smartphones.
- Verizon's 4G LTE network will cover more than 175 markets by year end.
- Wireline revenue was $10.1 billion in the first quarter, down 2.2 percent from a year ago.
- Verizon added 207,000 net FiOS Internet connections and 192,000 FiOS TV additions. Verizon had 4.3 million FiOS Internet customers and 3.7 million FiOS TV connections.
- Enterprise revenue in the first quarter was $3.8 billion, up 1 percent from a year ago.